Robert F Kennedy once said that a country’s GDP measures “everything except that which makes life worthwhile”.
Understanding how people feel or do not feel included in the benefits of economic growth is now more important than ever. Across the globe, citizens are taking action to articulate a feeling of disconnectedness from globalisation and capitalism. Turning growth into gains in well-being matters. Read more
South Sudan marked its fifth anniversary as a state this month not with celebrations but with rival armed factions shooting at each other in the streets of the capital. Several hundred people were killed in less than a week, tens of thousands displaced, and even sacrosanct UN camps protecting civilians were attacked. South Sudan ceased to perform even the minimal functions and responsibilities of a sovereign state long ago, and today the likelihood of a larger pogrom and escalating civil war is high.
A power-sharing agreement to end a conflict that started in December 2013 was centred around two people – President Salva Kiir and opposition leader First Vice President Riek Machar – who are irredeemably compromised among segments of the population, who view them as posing an existential threat to their communities. An African Union (AU) Commission of Inquiry found Kiir and Machar’s forces both responsible for killings that constituted war crimes and crimes against humanity. Sharing power between them has now failed disastrously on two separate occasions, and further attempts can only be expected to produce more of the same: immense human suffering and regional instability. Read more
There’s little doubt that Mexico’s government and private sector have been working overtime to increase global trade.
A recent report by the World Economic Forum and Bain & Company spelled out a host of efforts either completed or underway. Among the many: the Secretary of Economy (SE) eased the import-export process and lowered the transaction costs associated with importing goods that are inputs for export products. The Mexican Tax Administration reduced the time it takes to issue import-export permits and simplified the tariff code identification system. Read more
Oil market volatility has reached near-record levels in the first half of this year, as the first chart shows. It has averaged nearly 10 per cent a week, and over the past quarter-century its three-month average has only been higher during the Gulf War and the subprime crash. Yet there have been no major supply disruptions or financial shocks to justify such a dramatic increase. Instead, July’s report from the International Energy Agency reminds us that:
“OECD commercial inventories built by 13.5 mb in May to end the month at a record 3 074 mb. Preliminary information for June suggests that OECD stocks added a further 0.9 mb while floating storage has continued to build, reaching its highest level since 2009.” Read more
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In a surprising recent move, India has served notices to 57 countries including the UK, Germany, France and Sweden seeking termination of bilateral investment treaties (BITs) whose initial duration has either expired or will expire soon.
For the remaining 25 countries with similar treaties whose initial duration will expire from July 2017 onwards, such as China, Finland, Bangladesh and Mexico, India has asked for joint statements to clarify ambiguities in treaty texts, to avoid expansive interpretations by arbitration tribunals. Read more
If a week is a long time in politics, how does one gauge the tumultuous days in Westminster following the Brexit vote?
The unprecedented sequence of events in the wake of the EU referendum has culminated in mass resignations followed by leadership battles at Britain’s two main political parties. This, coupled with the extraordinary electoral contest unfurling across the Atlantic, has bred a greater sense of economic and political uncertainty in Europe and the US than many can remember.
For those of us at Actis, with a legacy of over 70 years of investing exclusively in emerging markets, the post-Brexit, pre-Trump landscape of the developed world makes us wonder whether our growth markets should now be regarded as a relatively safe haven for investors’ capital. Read more
Smart investors are recognising that China intends to lead the US and other countries in the race to develop green technologies as part of its ambitious new strategy for economic growth.
China’s 13th Five-Year Plan, for the period from 2016 to 2020, is guided by five principles: innovation, coordination, greening, opening up and sharing. When Zhang Gaoli, vice-premier, described these principles this year to a group of overseas business and academic leaders at the China Development Forum, he spent longest on ‘greening’, providing a clear indication of the importance being placed on green development for China’s future growth. Read more
Emerging equity markets have cumulatively underperformed developed equity markets by 70 per cent over the past six years. Most investors are now underweight EM equities as a result. But, based on the record number of queries we are receiving from institutional investors, it appears that large asset owners around the world are looking to rebuild these positions. We encourage investors to maintain a strategic allocation to the asset class.
It’s possible that emerging markets are finally poised to outperform: growth opportunities are superior and valuations less demanding. More importantly, we believe that EM is amongst the richest of all equity markets in alpha opportunities, or the potential to generate excess return. Read more
By Lee Cashell, Asia Pacific Investment Partners
Amidst the chaos sown by Brexit, one country’s protest vote is being greeted with relief by investors. In a landslide election, 3m Mongolians opted to end an era of policies that contributed to a fall off in foreign direct investment and economic growth.
After clinching an 85 per cent majority in the election, the Mongolian People’s Party (MPP) hopes to reinvigorate the economy through a more permissive operating environment and friendlier attitudes toward investors. Read more
On my way to the second morning of the 2016 Global Entrepreneurship Summit (GES), I took an Uber. Originally from Bolivia, my driver had fully embraced the Silicon Valley ethos — even its extraordinary “valley-centricity.” My evidence: as we were discussing Facebook founder Mark Zuckerberg, who was scheduled to speak the next day at GES, he looked into the rearview mirror and earnestly asked, “Can you imagine that Facebook was started so far away, like in Massachusetts, right?”
My surprise at his amusing myopia was only magnified later that day by comments from a venture capitalist in the Valley, who seemed summarily — and surprisingly — to dismiss social entrepreneurship as “meaningless” in a public session. When discussing social entrepreneurship, he said that it conjured images of “investing a million dollars to build a well in the Congo,” which, he argued, “could never be sustainable.” Read more
A few comments on Brexit from a British/EM perspective:
First, on the idea that somehow Brexit can be avoided. Frankly, I just don’t buy that. It was made crystal clear that this was an in-out decision, and we all voted on that assumption. It is patronising to the electorate to think we can change the rules because the majority voted the wrong way, at least in some peoples’ view. Read more
What once seemed impossible happened in Paris last December, when 195 nations agreed on a framework for maintaining the level of global warming at or below 2° Celsius. In Paris, CEOs from industries as far ranging as cement, transportation, energy and consumer goods manufacturing announced their own climate commitments to decrease their carbon footprints, adopt renewable energy and improve natural resource management.
Keeping the world on a low-carbon path, however, will not come cheap and is counted in the trillions of dollars. Just for having in place low-carbon, climate resilient infrastructure, an estimated $93tn in cumulative investments is needed globally from 2015 to 2030. Read more
By Max Wrey, Alaco
It is a bold, ambitious plan, but Saudi Arabia’s blueprint for reducing its dependence on oil through economic diversification could struggle to get off the ground unless the country’s education system experiences a major overhaul.
‘Vision 2030’, the brainchild of Deputy Crown Prince Mohammed bin Salman, sets out a bewildering range of policies designed to transform the economy, with the accent very firmly on cutting back the bloated public sector to make way for private enterprise.
Prince Mohammed wants to create just shy of a half a million private sector jobs and sees non-oil revenues more than tripling from Sar163.5bn ($43.6bn) to Sar530bn by 2020. At the same time, he anticipates the government wage bill’s share of the budget dropping from 45 to 40 per cent, to Sar456bn. Read more
By Dimitris Tsitsiragos, International Finance Corporation
Climate change is not just an environmental challenge— it is a fundamental threat to development in our lifetime. Without immediate action targeted at emissions reductions by the international community, climate change could result in an additional 100m people living in extreme poverty by 2030 and reverse many of the development gains of the last decade. A 2007 United Nations study projected adaptation finance needs for developing countries would start at $28bn annually by 2030.
The costs for this cannot be borne by the public sector alone. There is a key role for the private sector, including the financial industry, to play in the struggle for a greener future. In fact, the private sector is the largest source of climate finance, devoting $243bn in 2014 to climate-related investments, according to the Climate Policy Initiative’s Global Landscape of Climate Finance 2015. Read more
By Felipe Calderón, Global Commission on the Economy and Climate
Over the next fifteen years, the world needs to invest more in new infrastructure and upgrades than everything that exists today. This means we have a crucial window of opportunity to build it right, reflecting the new international priorities of the Sustainable Development Goals and the Paris Climate Agreement.
If we continue on our current high-carbon economic model, the world will need to invest more than $90tn in infrastructure. But it won’t cost much more to build our energy, transport, water, and telecommunications systems in a low-carbon way. Making our infrastructure cleaner and more sustainable could add as little as 5 per cent to upfront costs, which could be fully offset by lower operating costs. It would also make our economy cleaner, more efficient, and more productive. Plus, it would reduce the enormous costs of adapting to climate change. Read more
Matthew Blake, World Economic Forum and Gloria M. Grandolini, World Bank
Maria owns a tiendita, a small local shop on a side of the road in Medellin, Colombia, where she sells various items, including local soft drinks. But some potential customers are unable to buy anything at this tiendita — Maria’s shop is a cash-only operation. This scenario is not unique to this store: it demonstrates the omnipresent role cash has across the globe.
We estimate that in 2015, global cash and cheque payments among micro, small, and medium-sized retailers (MSMRs) stood at $19tn, compared to total payments to MSMRs – including those from various types of card – of $34tn. The majority of these cash transactions happen in emerging markets.
This first estimate of the size of the cash-based economy reveals the prevalence of cash in the global economy and suggests the size of the opportunity for electronic payments, which include swiping a card or tapping a smartphone. To put $19tn into context, it is larger than the GDP of the United States. Read more
By Asli Aydintasbas, European Council on Foreign Relations
To put it mildly, “Europe doesn’t know what to do with Turkey”. Always difficult, even torturous, the relationship between the European Union and Turkey has hit new highs and new lows in the last year.
There was the refugee deal, the summits and photo-ops of a type that had been absent for almost six years. There were steps toward visa liberalisation and the opening of frozen accession chapters.
But there were also threats and accusations. In Britain, Prime Minister David Cameron, in an effort to convince British voters to stay in the EU, had to pledge that Turkey would not become an EU member until the year 3000. Meanwhile, in Turkey, President Recep Tayyip Erdogan has made it a part of his routine stump speech to accuse Europe of supporting terrorism. Read more
The European, regional and global economic and political spillovers from the Middle East-Africa refugee crisis continue to defy lasting solutions, particularly in financing the absorption and resettlement of displaced millions where immediate costs reach billions of dollars.
The main UN refugee agency was chronically underfunded before the outbreak of the Syrian civil war and the Islamic State menace, which have caused additional lost output of $35bn in frontline countries according to development agency estimates. Read more
It is sad how anti-Turkish rhetoric and jingoism are so easily flowing off British and other western politicians’ tongues these days, with Turkey seemingly appearing as the whipping boy of Europe. So it is ironic how Brits and many continental Europeans are quite happy to go in great numbers to Turkey every year, to enjoy Turkey’s great hospitality and the common history of European and Asian civilisations in great cities such as Istanbul.
They also tend to forget that Turkey helped to defend Europe against the threat of Communism as a loyal Nato member for more than 50 years and is now standing in the front line, insulating Europe from the instability and terrorist threat emanating from the Middle East. Read more
M-Pesa, the phenomenally successful Kenyan mobile money platform, has created excitement from all corners of the globe. Kenyans paying utility bills and buying goods in their local store are doing so with their phones, not with cash or credit cards. The country has become a leader in mobile money innovation.
Despite their efforts, however, other countries seeking to skip over the problems with cash and brick and mortar banking have been unable to match Kenya’s success. Understanding the unique convergence of forces that enabled M-Pesa’s rise provides critical insight into how other countries can establish a scaled mobile money infrastructure. Read more